The Consequences of Sham Contracting

How the dangers of incorrect employee classification can hinder your business…

When engaging workers it can be difficult to determine as a business owner how the worker is to be categorised to fit the position and type of job that you need performed. Small to medium business owners are usually not aware that a work relationship should be classified as either an employment relationship or an independent contractor relationship.Read more!

Are Restraints of Trade Worth it?

“A restraint of trade is not worth the paper it is written on”. This is a common phrase that we hear from our business owner clients who have usually discussed a restraint of trade with their neighbour or a person at a barbeque. The truth is that a restraint of trade may be binding against the restrained party if it protects the legitimate business interests of the person or business that it is protecting.

There are a variety of different forms of restraints of trade including, the employer/employee relationship, business sale agreements, partnership agreements and other specific deeds of restraint. The main types of restraint are a restraint for a period of time from:

Working in a particular area or kilometre radius from the restraining parties business; and

Doing work for a particular client or customer of the restraining business.

When dealing with a restraint of trade the general rule is that it is unenforceable unless the party seeking to enforce the restraint can show that it is ‘reasonably necessary’ to protect the ‘legitimate business interest’ of that party.

Over the years there have been a lot of arguments relating to whether restraints of trade are reasonable or not, many of these have been decided by the Courts. From these cases some of the general considerations that will be made in deciding whether a restraint of trade is enforceable are:

Whether the clause actually protects the legitimate business interests of the person seeking to enforce the clause;

Whether the clause is reasonable to protect the legitimate interests of the party seeking to enforce it;

Whether the clause is attempting to simply preclude competition;

The position of the parties in the negotiation (for example, it is more difficult to enforce a restraint of trade in an employer/employee relationship than a business sale agreement);

What compensation is paid to the restrained party for the restraint of trade; and

Whether the clause will stop the restrained party from being able to earn a living.

There is no ‘one-size-fits-all’ restraint of trade clause that every business can use. In many cases a reasonable restraint for one person within a particular business may be different to the other persons in that business. For instance, it would be more reasonable to have a broader restraint of trade for a professional person working with clients than it would be for a secretary/receptionist employee. Further to that, if a person is selling their business it is often reasonable for them to be restrained from competing with the business they sold to protect the goodwill of the buyer.

As such it is important when drafting these types of agreements that you obtain proper legal advice relating to the terms of the agreement. This will ensure that the restraint of trade is tailored to the specific situation of the parties involved and therefore should be considered to be reasonable.

At Streten Masons Lawyers we act for business owners in drafting employment contracts and also in dealing with the sale or purchase of a businesses from third parties. If you require any assistance drafting a restraint of trade clause or have any questions relating to the enforceability of such a clause, please contact one of our solicitors on (07) 3667 8966.

Unlicensed builders beware: Three new QBCC powers that could land you in trouble

New powers granted to the QBCC mean that builders in Queensland need to be careful that they strictly comply with the terms of their licence. If you are Queensland builder, or operate in the building industry, it is essential that you hold the correct class of licence from the Queensland Building and Construction Commission (QBCC) for the work you are performing. The new powers allow the QBCC to seek an injunction preventing contraventions of the QBCC Act and the Building Act.

The dangers of not being correctly licensed have been highlighted in the recent decision of the Queensland Supreme Court granting an injunction against Ricky Allan Heath. This decision is also an example of some of the actions that the QBCC are now able undertake to prevent unlicensed building work.

Fines and Financial Penalties

Where a builder who is unlicensed or incorrectly licenced carries out, or simply undertakes to carry out building work, they can be subject to a maximum penalty of 250 penalty units.

While the amount of a penalty unit varies to year to year, currently this maximum penalty can be in excess of $29,000.00.

It is also important to note that where a builder carries out building work and is unlicensed, the builder is not entitled to payment for that work. The severity of this is reduced slightly in that the builder may seek to recover reasonable amounts spent on materials and the labour of others in performing the building work. However, the financial cost of lost personal earnings and profit can be substantial in addition to any other penalties.

Public Notices

The QBCC Act also gives the QBCC the power to issue warnings to the public about rouge builders. This can take the form of (as it did for Mr. Heath) a notice on the QBCC website cautioning the public, consumers, contractors and suppliers to be cautious in dealings with the offending builder.

The QBCC will also make note of why the warning is being issued, providing information as to how the builder failed to comply with the act, previous complaints concerning the builder and any previous relevant disciplinary action.

Injunctions

The most recent power received by the QBCC which was first used against Mr. Heath, is the power for the QBCC to request that the Supreme Court grant an injunction preventing a person from engaging in conduct that would breach the QBCC Act or the Building Act.

The terms of the injunction are left to the discretion of the court, however they may be extended to preventing the builder from carrying on a business for a stated period of time or on particular terms and conditions.

In addition, the legislation allows an injunction to be granted regardless of whether the builder has engaged in the conduct previously or whether it appears to the court that they will engage in the conduct again in the future.

At its most extreme, a failure to comply with an injunction can result in the offending party being imprisoned.

While Mr Heath’s example is an extreme one, the dangers of operating without being correctly licenced are real and can have serious consequences. At Streten Masons Lawyers we have extensive experience dealing with the QBCC and assisting builders with licencing issues. If you are looking for advice on QBCC licensing contact our office on (07) 3667 8966.

Tips for managing Health and Safety in your workplace

As an employer, providing a safe working environment for your employees should be in the forefront of your mind. October is National Safe Work Month and it is a timely reminder for all small to medium business owners to think about your workplace environment.

It is the legal duty of the employer to provide all employees with a safe working environment. In circumstances where employees have suffered injuries, your liability may extend to financial implications for time off work and insurance premiums for work cover claims. Following investigations, penalties may also be imposed by Fair Work Australia and Workplace Health and Safety Queensland.

When people hear “safe work environment” they normally turn their mind to physically dangerous or risky tasks rather than all types of tasks that an employee may perform in a business. All too often it is assumed that the industries that do not typically perform jobs posing an immediate risk to physical safety do not need to worry about providing a safe work environment.

However, the duty to provide a safe work environment is not limited simply to physical injuries to employees; it extends to employees’ mental health and protection from sexual harassment and bullying.

As an employer, keeping track of all your liabilities can be exhausting. While it would be ideal to have a workplace where injuries simply did not happen, the fact is that employees are human and injuries (whether physical or mental) occur in the workplace. However, you are able to limit your liability for employee injuries in circumstances where you can prove that you have implemented workplace policies for your employees.

We recommend that every workplace has, at a minimum, the following workplace policies:

Workplace health and safety procedures and safe work method statements for the duties that your employees perform, relative to the industry in which you operate.

Sexual harassment and bullying policies.

Social media and Internet use policies together with parameters for employee utilisation.

By implementing workplace policies, training your employees on the workplace policies and ensuring compliance with the workplace policies, employers will be able to limit their liability in an investigation where a workplace injury has occurred.

At Streten Masons Lawyers we aim to provide owners of small to medium businesses with tools to not only understand the liabilities as employers, but implement processes to limit liability where possible. Please contact our office on (07) 5428 1111 for a review of your employment processes and advice on workplace policies.

The benefits of choosing QCAT

It can be confusing and at times overwhelming trying to work out how, or where, to proceed to protect your legal rights. It is therefore important to understand how the Queensland Civil and Administrative Tribunal (QCAT) operates, and when it might be right for you.

The QCAT as we know it today has been described as a ‘super tribunal’. This is reflective of the fact that the QCAT was developed to consolidate 18 previously separate tribunals into a single body with jurisdiction over a wide range of subject matters, from debt disputes to the review of decisions made by government bodies.

As the QCAT is a tribunal rather than a court, matters are considered and decisions made by members rather than judges. A member does not need to be a legal practitioner, they do need to be, in the opinion of the Minister, a suitably qualified person.

Differences between QCAT and Court actions

A key difference between a proceeding in QCAT and a proceeding in the courts is the principle that, in general, parties in the QCAT are not legally represented. This is a reflection of the efforts to make the QCAT process less formal than a court action. Should a party wish to have legal representation an application must be lodged with QCAT seeking leave, which may or may not be granted depending on the circumstances.

In addition, as QCAT is not a court, it is not bound by the rules of evidence which can at times be quite complex and present difficulties for self-represented litigants in court proceedings. Again this serves to simply the process.

Advantages of QCAT

In considering the matters before it, the stated aim of QCAT is to assist the parties to resolve the dispute in a manner that is impartial and fair, while at the same time providing those services in a timely and cost effective manner in a way that the courts cannot.

To keep matters proceeding toward a resolution in QCAT, the tribunal is much more involved in setting down timeframes for the parties. Where courts rely upon parties to comply with the timeframes set down in legislation, QCAT will issue what are known as ‘directions’. These direct the parties to perform certain actions, for example providing evidence to one another and QCAT by a certain date. As an effect, the matters in QCAT will often proceed on a much shorter timeframe and a much more orderly fashion.

A further advantage of QCAT is that as part of the procedure, parties will often be directed to attend what is known as a compulsory conference. This is, in effect, mediation where a Member assists the parties to consider the issues in dispute, offers a view on the risks of proceeding to a hearing and helps the parties explore alternative options to resolve the dispute.

This can result in the parties arriving at an agreement without having to spend the time or incur the costs of taking the matter to a contested hearing.

When QCAT may be right for you

The most common use of QCAT is for minor civil disputes, such as a debt dispute up to a limit of $25,000.00 – although any order of QCAT in relation to a debt dispute would still need to be enforced through the Courts. However, if you have been the subject of an adverse decision by a government body, such as a decision by the Queensland Construction and Building Commission in relation to a building licence, QCAT is a commonly used avenue to have the decision reviewed.

Streten Masons Lawyers has a wide range of experience in advising clients on the circumstances where it is appropriate to proceed in QCAT or the courts, and in advising on recovery of orders made by QCAT. For advice on pursuing your matter in QCAT or elsewhere, contact our office on (07) 3667 8966.

Changes to the Foreign Investment framework

The Federal Governments approach to Australia’s Foreign Investment system is changing and property developers need to be aware of these changes. To this effect, the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 and the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 are proposed to take effect on 1 December 2015.

These Bills have been introduced as part of the Australian Governments reforms of the foreign investment sector. They include changes such as transferring responsibility of the regulation of foreign investors to the Australian Tax Office, and creating a register of foreign investors.

These amendments will significantly impact the Australia Foreign Investment Framework. These changes will particularly affect foreign investors and local developers, who should ensure that they are aware of the new requirements.

Advanced Off-the-Plan Approval

While developers will still be able to apply for advanced off- the- plan approval for developments this form of pre-approval will be restricted. The amendments will provide that a single foreign investor may only purchase $3 million worth of property in single development under an off- the-plan pre approval. Where they wish to purchase above this threshold the foreign investors will be required to apply for individual approval and pay the relevant fees to the Foreign Investment Review Board (FIRB).

Application Fees

The introduction of fees is a significant change to the foreign investment process.

The application fees will apply for residential, commercial and agricultural investments and will vary depending on the type of property and the value of the property. As such, property developers and foreign purchasers should be aware of these fees and take them into account when considering seeking approval from the Foreign Investment Review Board (FIRB).

These fees will commence at $5,000.00 for residential properties valued under $1,000,000.00 and will increase by $10,000.00 for properties valued over $1,000,000.00 and will continue to increase for each million in property value.

Developers seeking advanced off-the-plan certificates will also be required to pay an initial $25,000.00 fee with additional reviews of the fees based upon the development and value of the properties.

Foreign Investors seeking to apply for FIRB approval for commercial properties will be required to $10,000.00 for vacant commercial land and $25,000.00 for commercial real estate.

These fees are intended to be used to prevent the Australian tax payers being responsible for the administration duties requirement for foreign investor approvals.

Penalties

Under the proposed Bill new criminal and civil penalties will be introduced. These will apply for a range of infringement matters and may be enforced against numerous parties, including investors, developers or third parties (including solicitors) who assist investors to evade the requirements under the Foreign Acquisitions and Takeovers Act 1975 (Cth).

These proposed changes are likely to impact on developers and foreign investor’s decision to purchase property in Australia.

If you are considering seeking FIRB approval this year you should consider the potential benefits of applying before these changes come into force.

If you have any questions regarding the proposed changes or how these will impact your business, investments opportunities or investors, please contact us here at Streten Masons Lawyers on 07 3667 8966 to arrange an appointment to discuss your concerns. We will continue to keep our readers updated on these changes and will announce when the changes come into effect or if they are amended.

What is the process for removing a director of a company?

Disputes between directors and shareholders of companies can lead to a range of issues. Often where there is a dispute the parties will look at their legal rights, so it is important that company directors understand their rights and obligations at all times while they are a director of a company.

Where you are a director in a company that has multiple directors, careful consideration needs to be given to the company process for removing directors. The rules around how a director can be removed from any particular company are governed by either:

The replaceable rules in the Corporations Act;

The company’s constitution; or

Another agreement, such as a shareholders agreement.

It is critical that the shareholders and directors of the company understand these rules as they will affect the operation of the company and how decisions are made. If you are unsure which applies to your particular company and/or situation then you need to obtain independent legal advice on this issue.

The Corporations Act

Where a company is incorporated without a constitution the law dictates that the rules for the governance of the company are set out in the replaceable rules as stated in the Corporations Act. These rules state that a director can be removed by a resolution by the company in a general meeting.

This means that to remove a director the shareholders of the company need to hold a general meeting (which will need to be properly called with the appropriate notice given) and the director will be removed at the meeting. That decision will require the persons that control 50% plus 1 of the shares in the company with voting rights (usually ordinary shares) to decide that the director is to be removed.

Therefore if you are a director of a company that is governed by the replaceable rules, you can only be removed if the shareholders of the company decide to remove you as a director.

The Company Constitution

Rather than having a company governed by the replaceable rule, often when a company is established it will have a company constitution. A constitution is essentially a contract between the shareholders that regulates the management of the company and the roles and responsibilities of the director and other officers in the company.

Often the company constitution is a general document that will restate common principles. However, depending on the age of the constitution or where it was drafted, there may be subtle differences between the common principles and constitution that the directors are not aware of. Therefore it is imperative that you familiarise yourself with the terms of the constitution. Ordinarily the constitution’s position on the removal of a director will be the same as the replaceable rules, that is, the decision will require 50% plus 1 of the shares in the company with voting rights.

Other Agreements (Such as a Shareholders Agreement)

Where you start a company that has multiple investors there are often matters that are not dealt within the constitution or the replaceable rules that should be decided upon early in the conception of the company. In this situation we usually recommend that the parties enter into a shareholders agreement to ensure that the rights and obligations of the shareholders are, as much as possible, agreed to and set out in the form of a contract between the parties.

A shareholders agreement may deal with the removal of a director or it may be silent on the issue, in which case the company’s constitution or replaceable rules will apply. In dealing with the removal of a director, a shareholders agreement may:

Refer to another document (such as those stated above) for the process of removing a director;

Provide for another mechanism, sometimes requiring persons controlling 75% of the voting shares in the company being required to decide to remove the director of the company; or

Restrict the removal of a director to the discretion of a particular shareholder to ensure that each of the shareholders rights are protected by having a director of the company.

If your company has a shareholders agreement you should review the document to see what the rights and responsibilities are in relation to the removal of directors (as long as all of the other parts of the agreement).

Different companies have different rules. If you do want to remove a director from a particular company it is important that you do not just make an assumption that one of the above scenarios applies. It is crucial to obtain advice from your lawyer to ensure the correct procedure is followed, otherwise this could have a massive impact on the power that you exercise in your company.

In our experience acting for small to medium sized businesses and their owners, this issue is one that arises often. If you would like us to review any of your rights and obligations as a shareholder or company director, please contact our office on 07 3667 8966 to make an appointment.

Streten Masons Lawyers 4th Annual Golf Day – 2015

On Monday 7th September we held our fourth annual Golf Day at the Caboolture Golf Club. Each year Streten Masons Lawyers puts on an event for its business partners as a thank you for being great businesses to work with. We were glad to see 58 of our business and referral partners come along and participate in the day.

Everybody got in early for a 7.30am breakfast before hitting the greens in teams of four for 18 holes of golf. Luckily the weather was kind and we had a bright, sunny day to work with. Many of the holes were sponsored by attendees of the day, and we also had a range of prizes provided.

Our golfers played a 2-person Ambrose in teams of four around the 6059 metre long course. While there were various levels of success, we are assured everybody enjoyed themselves.

We would like to extend a special thank you to all of the companies who sponsored a hole or prize on the day; Accurate Estimating Services, Richardson & Wrench Caboolture, Kangaroo Buslines, GMD Accounting, Mobbs Baker Wealth, Balanix Solutions, One Build Projects, Independent Recovery Services, Pearce & Heers Insolvency Accountants, Your Office Choice, Commercial Credit Control, Liquor & Gaming Specialists, New Age Solutions, Mobbs & Company, Solace Financial, Belle Property Bulimba, and Loan Market. Thank you for making the Golf Day that much more enjoyable!

Thank you to everyone who attended the Streten Masons Lawyers Golf Day, and for your ongoing support. Here’s to another great golf day in 2016.

Know your obligations under the National Credit Code

When you are in the business of providing credit to a consumer, you are likely aware of the various pieces of legislation with which your business will need to comply during the transaction. Just as importantly, you should also be aware of the consumer protections contained within a wide range of legislative and regulatory instruments.

One such regulatory document which credit providers should be familiar with is the National Credit Code (NCC). The NCC is an Australia-wide regime of Consumer Protection contained within the National Consumer Credit Protection Act 2009, setting out specific protections for consumers when they enter in to consumer credit contracts.

It is extremely important for you as a credit provider to know whether the NCC applies to a credit contract you have or are intending to provide, and to consequently understand your obligations as a credit provider. It is often difficult for businesses looking to provide credit to determine which, if any, of these requirements, their contract documents must comply with.

When does the NCC apply?

The NCC applies to credit contracts, that is, a contract under which credit is or may be provided. Credit is provided where a person incurs a debt, which is deferred to be paid at a later date. The NCC also sets out specific situations to which the code does and does not apply.

The NCC will apply to contracts where:

The lender provides the credit in the course of a business of providing credit (for example a bank loan);

A charge is made, or may be made, for providing the credit;

The debtor is a natural person; and

The credit is provided, or intended to be provided, either wholly or predominantly:

for personal, domestic or household purposes;

to purchase, renovate or improve residential property for investment purposes (subject to limitations); or

to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes

The NCC will not apply to a wide range of contracts, including:

Short term credit contracts where the term is no more than 62 days, the maximum amount of credit fees and charges is not more than 5% of credit amount, and the maximum amount of interest charges does not exceed 24% per annum;

Credit contracts entered into without express prior agreement; and

Credit contracts where only account charges are payable.

Thus the NCC provides protection for individuals in a range of consumer credit transactions obtained for personal use. It does not apply to individuals or companies seeking credit for business purposes.

Key Features of the NCC

Presumed Application

Under Section 13 of the NCC, there is a rebuttable presumption that the Code will apply to a credit contract. This presumption applies unless the debtor makes a Business Purposes Declaration prior to entering into the contract. If entering into a contract it is important that you carefully consider, and seek legal advice if necessary, on the debtor’s purpose in entering into the contract.

Disclosure Obligations

Where the NCC applies to a credit contract, there are a wide range of disclosure requirements with which the credit provider must comply.

Prior to entering into the contract the credit provider must give the consumer a pre-contractual statement and information statement. The pre-contractual statement must provide the debtors with information relating to the provision of the credit including, the credit provider name, the amount of credit, repayment terms, percentage rate, and fees and charges. The information statement sets out the debtor’s statutory rights and obligations under the contract. The detailed information provided can be used by potential debtors to understand the terms and risks of the contract prior to being bound by the contract.

When entering into the contract the credit provider must provide a contract to the debtor. During the term of the contract, the credit provider is required to provide the debtor with periodical statements of account. The credit provider is also entitled to make various unilateral changes to the contract, and must notify the Debtor of the changes in accordance with the NCC.

Where a credit provider fails to comply with these obligations they may face criminal or civil penalties.

Unjust transactions

The Courts have a discretionary power to reopen unjust contracts under the NCC; unjust contracts include contracts which are unconscionable, harsh or oppressive. The Court must consider a wide range of factors when determining whether a transaction is unjust. Where the Court finds that a transaction is unjust they may make a wide range of order including setting aside or altering part or a whole agreement.

Hardship Variations

Under the NCC, a debtor who is not able to comply with the requirement of the contract may give the credit provider a hardship notice to seek a variation of the terms of the Contract. Once this occurs, a process commences in which the credit provider is obligated to consider varying the terms of the Contract. If you have been given a hardship notice it is important that you carefully consider all of the relevant factors and be aware of your rights and obligations relating to these notices.

Early Repayment

A debtor may make early prepayment of the contract and may pay out the contract at any time under the NCC. This is subject to the credit providers’ payout figure, which may include interest and early termination charges.

Drafting agreements that comply with the National Credit Code is a process that takes a great deal of care and consideration to ensure that they are drafted in compliance with the law. Should you provide credit to which these provisions apply then, please contact one of the Solicitors at Streten Masons Lawyers on 07 3667 8966 to discuss your requirements.

Buying Property in a Community Titles Scheme: What you should look for

Purchasing a home or investment property is often the largest financial decision that a person will make during their lifetime. Noting this, it is important to ensure that you properly investigate the property prior to committing to an unconditional contract.

What can you do to make sure you have fully investigated the property?

The simplest way to assess the property itself is to order a full body corporate search through your solicitor. This search goes above and beyond the standard body corporate search that is usually undertaken (revealing administration levies, insurance levies, and sinking fund contributions) as it provides you with the full set of body corporate meeting minutes. This search is additional to the standard searches that are often conducted and reveals details related to the body corporate only.

It is important that when you purchase a unit or a townhouse in a body corporate that you are buying into a scheme whereby the body corporate is responsible for the maintenance and repair of all common property. This includes the outside walls, driveways, communal walkways etc. This means that if a repair is needed and the body corporate cannot fund the repairs, the owners of the body corporate need to contribute a share of those costs.

What does the full body corporate search reveal?

A full body corporate search will often reveal the following upon proper examination:

Whether there are any problems with the property that haven’t been disclosed on the contract;

Whether the body corporate members have discussed proposing extra levies being imposed;

The balance of the current sinking fund;

If there are any works that are to be conducted in the near future that the owners (which be include you in the future) will need to be financially responsible for; and

Past issues and levies that have occurred which give an idea of how other property owners in the scheme tend to deal with issues.

While this search can be three or four hundred dollars more expensive than the standard body corporate search, it allows you to make a more informed decision prior to committing to a completely unconditional purchase. While the cost of this may seem high in comparison to a standard body corporate search, it may save you money in the long run.

For example, the owners of a property may discuss at a body corporate meeting some major works needing to occur at the property, such as replacing the roof. The seller may not have been part of these meetings, this may not be disclosed on the contract, or alternatively they may have chosen not to disclose the information (we note however that there may be other contractual avenues and recourses available at this point in time). The roof replacement may come at a substantial cost and you may be in a position where major works are needed that dramatically alters your financial state post settlement occurring.

We strongly recommend all clients purchasing properties in a community title scheme to order a full body corporate search early in the transaction in order for the results to be returned and reviewed prior to the contract becoming unconditional.

If you are looking at purchasing a unit or other type of property in a Community Titles Scheme then please contact our office on 07 5248 1111 to speak to an experienced solicitor.